• Atlanta
• Boston
• Dallas
• Ft. Lauderdale
• London
• Minneapolis
• New York
• Oakland
• Philadelphia
• Washington, DC

by Nicholas Smetzer

Texas Courts apply the concurrent-causation doctrine, which sets out that “when covered and non-covered perils combine to create a loss, the insured is entitled to recover that portion of the damage caused solely by the covered peril.” Advanced Indicator & Mfg., Inc. v. Acadia Ins. Co., 50 F.4th 469, 477 (5th Cir. 2022) (quoting Dall. Nat'l Ins. Co. v. Calitex Corp., 458 S.W.3d 210. 222 (Tex. App. 2015). Texas courts routinely encounter insured parties who have proof that damage occurred yet fail to properly document and separate the covered damage from the uncovered damage.

Oftentimes it appears as though insured parties mistake their duty under the concurrent-cause doctrine as simply proving that damage occurred within the relevant policy period. This is a mistake and frequently prevents an insured’s recovery. Under Texas law, the insured is obligated to both establish covered damage and, if there are covered and non-covered causes that contributed to that damage, separate the damages caused by the covered cause of loss from other non-covered causes. The Northern District Court of Texas’s recent decision in AZ Wealth Big Springs, LLC v. Third Coast Insurance Co. joins a growing body of caselaw supporting the use of the concurrent-cause doctrine, and further establishes that being mistaken about the requirements to allocate and separate covered could be “fatal to recovery”.

Third Coast issued a property insurance policy to AZ Wealth for buildings in Big Spring, Texas. AZ Wealth alleged that a hailstorm, which was a covered peril under the policy, caused damage to all roofs of the property. AZ Wealth relied predominantly on the opinions of its public adjuster that the roofs required replacement, as well as that a particular hailstorm that occurred during the March of the coverage period of the policy was a “likely” cause of damage. When Third Coast received the claim, the insurance company’s adjuster pushed back on these assertions, determining that further investigation was required, particularly concerning the extent of the damage. While Third Coast eventually made a series of payments totaling $575,659.32, AZ Wealth continued to assert that the entirety of the damage to the roofs was caused by the March hailstorm and that it was entitled to further payment under the policy.

The initial decision of Magistrate Judge John R. Parker was reviewed by Judge James Wesley Hendrix, who, relying on straightforward precedent in the Texas common law, found that a mere agreement between the parties that the roofs required replacement could not provide a jury with grounds to find that one storm was the sole cause of the loss. See also Certain Underwriters at Lloyd's of London v. Lowen Valley View, L.L.C., 892 F.3d 167, 170 (5th Cir. 2018). The opinion in Lowen Valley, echoed by Judge Hendrix in his decision in AZ Wealth, emphasizes that to satisfy concurrent-cause doctrine, a plaintiff may not merely provide evidence that a covered event caused or potentially caused damage. Rather, a jury must be provided with evidence that allows them to reasonably segregate the amount of damage caused by the covered event from the damage caused by uncovered events. Merely addressing a particular event as the most likely cause or baselessly concluding that one storm caused all damage when other storms of similar strength could have been equally capable fail to meet this standard.

In Lowen Valley, the insured failed to provide data supporting its experts’ claims that all damage suffered by the insured was due to a storm within the coverage period. While the insured’s engineers definitively provided proof that the property sustained damage, their failure to prove when the damage occurred entitled the insurer to summary judgment.

Crucially in AZ Wealth Big Springs, the plaintiff’s own expert failed to sufficiently rely on documentary or numeric data to establish that the March storm caused damage and even acknowledged the possibility of other storms occurring in April and May of that same year being partially responsible for the damage. In fact, all the evidence used by AZ Wealth in response to the summary judgment motion was deemed unsatisfactory, including proof of agreement between AZ Wealth and Third Coast that March 13th was the date of loss and physical evidence of hail splatter and hail-impact on roof surfaces. AZ Wealth’s failure to supply an accounting for the damages to which the March storm was fatal to its recovery, and Third Coast was awarded summary judgment.

Both insureds and insurers should take note of this decision. Texas courts will not make insurers pay for incidental damages simply because they occurred alongside a covered event, and the burden is on the insured to demonstrate the extent to which its damage falls under its policy. 

_________________________________

The opinions expressed are those of the authors and do not necessarily reflect the views of the firm or its clients. This article is for general information purposes and is not intended to be and should not be taken as legal advice.